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FCC Decision May Mean the End of Such Companies as Netflix

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Wednesday, 15 January 2014

FCC Decision May Mean the End of Such Companies as Netflix

New FCC rules for the Internet were passed, following a promise made by President Obama and the efforts of FCC chairman Julius Genachowski (who has now stepped down), but they are now being overturned. These rules were set in place to ensure the openness of the Internet. However, 3 judges on the D.C. Circuit Court of Appeals have sided with a Verizon Wireless lawsuit, saying the FCC acted outside its authority by enacting the rules. If the decision stands, it could mean that Internet providers could soon start charging websites like Google, Facebook and Netflix to reach users - meaning the possible end of these widely loved companies.

The FCC's net-neutrality rules, formally called the Open Internet Order and adopted in late 2010, bar Internet service providers from blocking websites or from discriminating against any Internet traffic, except for reasonable network management. Those who support the rules claim they are essential for
maintaining a free Internet. They argue that the Internet should be an open platform where all websites receive equal treatment, whether they are large corporate services or small start-ups. However, other critics (including Republicans) insist the rules unnecessarily restrict the business decisions of Internet providers.

This oral argument took place in September and while many observers expected the D.C. Circuit to strike down at least part of the net neutrality order, the court went even farther. The judges began throwing out both the anti-discrimination and anti-blocking provisions and concluded that the FCC was inappropriately treating broadband Internet as a "common carrier" service. As an example, traditional phone lines, railroads, and airlines are considered common carriers and must offer service to everyone. Though the court ruled, because the FCC chose to classify broadband Internet as an "information service," it lacks the authority to impose common carrier obligations on it.

It's now FCC Chairman Tom Wheeler's job to respond to the ruling. In addition to appealing the decision to either the full D.C. Circuit or the Supreme Court, Wheeler could also decide to reclassify broadband as a "telecommunications service." Although the FCC has limited authority over "information services," it has wide authority over "telecommunications services," including the power to regulate them as common carriers. It's hard not to think that reclassifying Internet service would more than likely spark a fight with those who may fear the FCC would be granting itself total power to oversee the Internet. Rest assured, Wheeler exclaims, "I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment. We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends, continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans."

The decision was not quite as bad as it could have been for the FCC, as 2 of the 3 judges rejected Verizon's argument that the FCC has essentially no power over broadband Internet. The court did not address Verizon's claim that the rules violate its First Amendment free speech rights—an argument that could very well endanger a mass of federal regulations. Randal Milch, Verizon's general counsel, issued a statement saying the ruling will "not change consumers' ability to access and use the Internet as they do now. The court's decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet. Verizon has been and remains committed to the open Internet which provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want." However, at the oral argument in September, Verizon attorney Helgi Walker told the judges that if the rules were struck down, the company planned to explore new "commercial arrangements" such as charging websites for faster service.